Arizona State-Minimum Car Insurance Requirements Raised July 1, 2020

On July 1, 2020, something rather momentous happened in the state of Arizona. For the first time in nearly five decades, Arizona state-minimum car insurance requirements were raised.

The new law is codified in the Arizona Revised Statutes under Section 28-4009. Auto insurance policies issued or renewed after July 1, 2020 must pay at least:

(i) $25,000 because of bodily injury to, or death of, one person in any one accident.
(ii) Subject to the limit for one person, $50,000 because of bodily injury to, or death of, two or more persons in any one accident.
(iii) $15,000 because of injury to, or destruction of property of, others in any one accident.

These three numbers — $25,000/$50,000/$15,000 — represent new limits that are paid out to another person if a motorist is at fault in an accident. You cannot purchase insurance for less than these limits.

The Arizona Legislature passed the state bill that put these new limits into effect — State Bill 1087 — in May 2019. The bill was signed into law by Arizona Governor Doug Ducey on Friday, June 7.

Previous Coverage Limits Had Become Outdated

When you receive your renewal notice for auto insurance — or if you are currently shopping for new insurance — the quotes you receive may look a little different. This is simply because Arizona state-minimum car insurance requirements have been raised.

The previous coverage amounts for motor vehicle accidents were $15,000 per person, per accident; $30,000 total accident; and $10,000 for property damage.

The problem with the old limits is that they were based on cost-of-living equations that were established in June 1972, when a McDonald’s Quarter-Pounder with cheese cost just 70 cents. These days, the same burger costs $3.79. Only the number of calories has remained the same!

Due to inflation, limits that seemed quite adequate nearly five decades ago had grown completely inadequate over time. Medical expenses and the cost of vehicles were much lower in 1972. Today, you can no longer step foot in an ER for less than a few thousand dollars.

Bill’s Passage Overcame Insurance Industry Resistance

The insurance industry was adamantly opposed to this move. Time and time again, this bill had been brought to the Arizona Legislature in one form or another by various organizations, including one that I belong to — the Arizona Association for Justice. Time and time again, it did not pass.

Why did insurance companies want to keep Arizona car insurance minimums so low? Frankly, under old amounts, they could pay out less, should someone be in an accident.

Because payout limits were so low, insurance coverage was not protecting people injured in automobile accidents. That’s why the Arizona Association for Justice and like-minded organizations fought so hard to increase these limits.

Accident Victims Have More Protections from Out-of-Pocket Costs

Assume that you’re in an auto accident. You go to the emergency room and get a normal workup. You may not have any broken bones, but you’re given some imaging, as a precaution. Later, you go through physical therapy, and start to feel better.

The cost of medical care just for these simple procedures and therapies could well exceed $15,000 — and possibly total $25,000.

• Under the old limits, if someone only carried Arizona state-minimum car insurance, the most you could receive per accident was $15,000. If the person who caused the accident did not have any additional money to contribute to this claim, to help you pay off all your medical bills, you would be forced to pay the $10,000 out-of-pocket for an accident that was not your fault.
• Under the new limits, insurance coverage would reimburse you for that $10,000 differential — up to the new $25,000 limit.

Keep in mind that this analysis does not account for pain and suffering or lost wages.

Of course, there are people who carry much more than the minimum limits. I encourage you to do the same, if your economic situation allows.

Vehicle Damage and Arizona State-Minimum Car Insurance

Today’s vehicles have more features than ever, which is reflected in higher sticker prices. Yet, this also means that vehicles’ values can suffer quite a bit more damage. Frame damage or deployed airbags can result in a total loss.

Unless you’re looking for an older model or a used vehicle, it’s very difficult to find a vehicle under $10,000 these days. Anything new costs far more than $10,000.

Now that property damage limits have been raised to $15,000 — from $10,000 — it’s more likely that Arizona state-minimum car insurance will more fully cover damage to newer vehicles.

Higher limits make it more possible to recover what’s called a “loss of use claim.” These are the expenses related to renting a vehicle while your vehicle is either being repaired or declared a total loss, as well as time needed to find a new vehicle.

Higher limits also allow more accident victims to be compensated for their diminished value claims. A vehicle loses value because of the simple fact that it was damaged in an accident. Even though it’s repaired, it’s still worth less.

Arizona law states that you do not have to wait until you sell your car to collect for that difference in value.

To illustrate how diminished value works, imagine the following scenario:

• Let’s say that your vehicle was worth $20,000 before an accident.
• After an accident, it receives $8,000 of repairs. The insurance company chooses to repair it and not declare it a total loss.
• However, your vehicle is now worth less, because it was in an accident.
• You order an appraisal from an auto expert, who tells you that your vehicle lost $6,000 of value due to the accident. Therefore, not only should the vehicle receive $8,000 in repairs, but you should also be compensated for $6,000 in diminished value.

In sum, the old $10,000 limit did not provide enough coverage to repair vehicles, compensate owners for their loss of use, or account for diminished value.

Kudos to the Arizona Association for Justice

Higher Arizona car insurance minimums reflect values the Arizona Association for Justice emphasizes: to serve the community, to protect the rights of the public, and to make sure that injured victims are protected in the event that they get hurt due to someone’s negligence.

With that said, a big thank you goes to Jeff Trachtenberg of the Arizona Association for Justice. Jeff is a stalwart in our community and absolutely pushed hard to increase the limits in Arizona, so that they caught up with other states’ limits. He created a better environment for those who are injured in accidents, and those that need to take advantage of these new insurance limits.

If you have more questions about new Arizona state-minimum car insurance, or if you’re just curious about what kind of coverage you should have, give Negretti & Associates a call. We can help make sure you’re protected. Contact us online, call us at 602-531-3911, or text us with questions.